After Harvey deluge, a sales surge

Texas stores see a frenzy, and Florida could be next

Braman Mini of Palm Beach was boarded up in preparation for Hurricane Irma.

As Florida dealers braced for Hurricane Irma late last week, battered stores in southeast Texas shifted into super-selling mode.

Desperate for transportation in the aftermath of Hurricane Harvey, Houston-area residents suddenly became car buyers.

Local dealerships are handling the "abnormal" traffic consumers are bringing to stores as residents look to replace their vehicles, says Steven Wolf, chairman of the Houston Automotive Dealers Association.

Wolf, who is also vice president of Helfman Motors, says he expects sales at his five stores this month to outpace the year-earlier period by 40 to 50 percent because of the post-Harvey rebound. Helfman stores sell Fiat Chrysler Automobiles and Ford Motor Co. vehicles.

Sales activity, he said, went from one extreme to the other in a matter of days.

When Helfman staffers returned to work Aug. 30 — the Wednesday after the storm made landfall the previous weekend — there was little activity. The next day, Wolf said, it felt like the "ice was thawing" as traffic began to trickle in. Then things went bonkers on the Friday ahead of Labor Day, Wolf said. The momentum hasn't slowed since.

Considering Houston's sheer size — the metro area is about the size of New Jersey — the sudden sales blast isn't too surprising. Wolf said people need to get around, so getting back into a vehicle is one of the first orders of business.

"People have moved past the 'Oh, my God, what am I going to do?' [stage] to 'Let's get a plan; we need to do this, this and this.' At the top of the list, it is, 'Let's get a replacement vehicle,'" Wolf told Automotive News.

While coastal Texas recovers from Harvey, Floridians were tracking Hurricane Irma. AutoNation Inc. planned to close 76 stores in the state late last week and rushed inventory to safe spaces. Many other dealerships in the region did likewise.

Irma is billed as one of the strongest storms ever, but it wasn't expected to cause as much vehicle damage as Harvey, which struck a more densely populated area, according to Cox Automotive. Cox estimated that vehicle losses during Irma's initial impact in the Miami, West Palm Beach and Fort Myers-Naples areas would be 130,000 to 200,000 vehicles — far fewer than the 300,000 to 500,000 lost in the Houston area.

Tight inventory

With so many vehicles lost in Houston, dealer inventories are getting pinched.

Wolf said he was urging his friends in need of replacement vehicles to get them as soon as possible. If not, they could be forced to order their desired models instead or go outside the market to find them. Waiting too long also puts people at risk of buying flood-damaged vehicles.

AutoNation CEO Mike Jackson told CNBC's "Squawk Box" last week that the retailer doesn't want to sell or take any flood-damaged cars as trade-ins, but it has to be vigilant. Already, he said, consumers have claimed their trade-in suffered no flood damage, "and we open up the trunk, and a family of frogs jumps out."

Photo

AutoNation CEO Mike Jackson tells service advisors Dustin Thomas, right, and Lakin Collier that they were going to receive $3,500 in their paychecks to assist with their transition after Hurricane Harvey. They work at AutoNation Ford Katy in Houston.

Jackson was in Houston last week meeting staffers. He said about 50 "lost everything" and another 200 were "seriously impacted." He told those facing adverse circumstances that they would get $3,500 in their paychecks.

AutoNation's chief marketing officer, Marc Cannon, agreed with Helfman's Wolf that consumers in Houston are coming back to the market. Cannon said the company is assessing inventory losses as it works to get more vehicles shipped there. Automakers have been supportive, Jackson told CNBC, diverting production from other markets into Houston.

Group 1 Automotive Inc. confirmed that more than 98 percent of its inventory of over 15,000 vehicles in the Houston and Beaumont, Texas, areas survived Harvey. The company attributed that partly to its efforts to move inventory to safer spots.

Group 1 is seeing a sales uptick in Houston and Beaumont, said Pete DeLongchamps, vice president of manufacturer relations, financial services and public affairs. Insurance companies are doing a "great job of assessing claims," he said. "Consumers are getting back on their feet."

Irma panic

Meanwhile, South Florida residents were encouraged to evacuate before Irma reached land.

Dealers say the mandated travel led to consumers dropping by service shops before hitting the road, along with gasoline shortages that directly impacted stores trying to deliver vehicles.

Luis Somoano, president of Doral Lincoln near downtown Miami, said his service department was humming early last week as evacuation preparations began. He even sold four cars Wednesday, Sept. 6, which surprised him because the vehicles couldn't be insured with the storm approaching. At least one of the cars Doral Lincoln sold last week also couldn't be delivered because a gasoline shortage left the store unable to fuel the car.

Somoano, who bought the store in 2008, said the dealership had yet to take any significant damage from a storm. It moved its inventory to a nearby shopping mall and closed early on Thursday, Sept. 7, as Irma moved in.

"My building is supposedly hurricane-proof. Let's see how this goes," Somoano said. "With [Hurricane] Andrew in 1992, a lot of the places that were hurricane-proof disappeared. When you have a storm of this magnitude, you have to be very lucky."

Braman Motorcars closed its dealerships on Friday, Sept. 8, and expected to remain closed all weekend. The group sells Bentley, BMW, Mini, Porsche and Rolls-Royce models in West Palm Beach and Jupiter, Fla.

The West Palm Beach operation moved about 1,000 cars to the parking garage of the Raymond F. Kravis Center for the Performing Arts. The Jupiter store transported vehicles to a parking garage on its property.

With the storm looming last week, Braman Motorcars was prepping a post-storm ad blitz to help it reel in consumers in the post-Irma rush.

"We're going to hopefully see some of that business coming on the aftermath of the hurricane," Danny Bayard, Braman Motorcars' advertising and marketing manager, said​ last week. "We're positioning our radio station and TV partners. As important as hurricane preparedness is for our staff, post-hurricane preparedness is just as important."

Earl Stewart, a Toyota dealer in Lake Park, Fla., tried to keep his store open as long as possible before Irma. Although he said he likes to stay open for customers, he understands some staffers want to leave town. He's never held this against his team and they've always been given paid leave if they want to evacuate. But for Irma, Stewart decided to put this fact in writing for the first time.

"I was a lot more compassionate with my employees. I've always wanted to put the customer first, and I've always insisted that we stay open to service our customers," said Stewart. "We proactively let everybody know this time: Don't feel bad about going home early."